DOLORES GRANADA, AND ESTRELLA GRANADA, ET AL., PETITIONERS, VS. PHILIPPINE NATIONAL BANK, ET AL., RESPONDENTS.

Granada versus Philippine National Bank

The Case

This is a petition brought by Dolores Granada and Estrella Granada against the Philippine National Bank, seeking review of a decision of the Court of Appeals. The bank sued the Granada sisters to collect the unpaid balances of sugar crop loans released to them and evidenced by promissory notes they personally signed. The sisters defended on the ground that they borrowed only as representatives of their parents, a phrase inserted in the bank's amended complaint. The case matters because it teaches when a party's own pleading operates as a binding admission, and when the whole record may be read to explain or neutralize it.

Procedural History

The Philippine National Bank filed its original complaint in the Court of First Instance of Negros Occidental to collect the unpaid loan balances. The defendants moved to dismiss on prescription and on the theory that they signed only as representatives of their parents. The motion was denied. The defendants answered, repeating that they acted as mere representatives and administrators of their parents. They then moved that the bank be allowed to amend the complaint to include Cristeta Granada as principal defendant, and the trial court granted leave for both parties to file such amended pleadings as they wished. The bank filed an amended complaint impleading Cristeta Granada and inserting the phrase "as representatives of their parents."

The trial court sustained the defendants' contention that they were not personally liable because they acted merely as agents of a disclosed principal, and ruled in their favor. The bank appealed, and the Court of Appeals reversed the trial court after reviewing the facts and antecedents, rendering judgment for the bank. The Granada sisters then brought this petition to the Supreme Court to review the decision of the Court of Appeals.

Facts

Dolores, Estrella, Felisa, and Corazon Granada obtained sugar crop loans from the Philippine National Bank for the crop years 1940 to 1941 and 1941 to 1942, for the cultivation and production of sugarcane in Hacienda Cristeta. The loans were personally received by the petitioners, and the corresponding promissory notes were personally executed and signed by them. The notes promised payment on demand with interest, waived certain rights upon judicial execution, and stipulated attorney's fees of ten percent of the amount due should collection require counsel. The unpaid balances, whose amounts were never disputed, stood at 1,982 pesos and 24 centavos and 1,349 pesos and 90 centavos.

In the original complaint the bank alleged that the four sisters secured the loans and received the money as evidenced by the promissory notes. In their motion to dismiss and in their answer, the sisters claimed they signed only as representatives of their parents, Matias and Cristeta Granada, who owned the hacienda. The bank replied that the documents were signed by Dolores for herself and as attorney-in-fact of her sisters under a notarized power of attorney, and that it held no document or evidence to hold the parents liable.

At the defendants' own instance, the bank amended the complaint to implead Cristeta Granada, and it was there that the phrase "as representatives of their parents" first appeared. Cristeta Granada answered under oath and denied giving any authority to her daughters to borrow in her behalf. At trial the bank presented the promissory notes, whose genuineness and due execution were unquestioned, together with proof of receipt of the loans and of nonpayment despite demands, all admitted without objection.

Issues

• Whether or not the phrase "as representatives of their parents" in the amended complaint is a binding judicial admission that the Granada sisters borrowed only as agents of a disclosed principal, thereby freeing them from personal liability.
• Whether or not the bank, in filing the amended complaint, changed its cause of action from one against the sisters personally to one against them as mere representatives.

Applicable Provisions

The Court of Appeals relied on the rule of liberal construction of the Rules of Court, which the Supreme Court adopted in affirming its judgment:

These rules shall be liberally construed in order to promote their object and to assist the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding.

This rule allowed the amended complaint to be read, not as a new cause of action, but as an alternative statement of the claim against the sisters and their mother.

The Court of Appeals also invoked the rule permitting alternative statements of a claim in a single cause of action:

Section 9, Rule 15.

This provision supports treating the amended complaint as pleading, in the alternative, that the sisters were either personally liable or liable only as representatives.

And the rule allowing several defendants to be joined in the alternative:

Section 13, Rule 3.

This provision sanctions joining Cristeta Granada in the alternative, so that relief may be granted against whichever defendant is ultimately shown to be liable.

Ruling

On the first issue, the Court held that the phrase in the amended complaint did not operate as an absolute admission freeing the sisters from liability. An admission must be taken as an entirety, together with the qualifications that limit, modify, or destroy its effect. The bank's own reply, stating that it had no document or evidence to hold the parents liable, and the sisters' sworn denial by Cristeta Granada that she authorized any borrowing, neutralize the phrase. The Court of Appeals found that the bank acted through a mistaken belief that the inserted phrase did not amend its cause of action.

On the second issue, the Court held that the bank never intended to change its cause of action. Reading the amended complaint liberally, it may be treated as stating alternative claims or as joining defendants in the alternative, and the trial court could render judgment against all or some of the defendants as the facts warranted. The Supreme Court found no error in the assessment of the facts or the application of the law, and affirmed that the sisters remained personally liable on the notes they signed and received.

Doctrine

A party's admission in a pleading is binding, but it is not absolute. It must be read as an entirety, and connected portions that explain or neutralize it must be weighed in determining its probative value. Evidence aliunde may show the admission was made through palpable mistake. A complaint may plead alternative statements of a claim and join defendants in the alternative, and the trial court may grant relief against whichever defendant the facts show to be liable. A party who signs and personally receives a loan cannot escape personal liability merely by alleging in an amended complaint that she acted as a representative of a disclosed principal.

Disposition

The Supreme Court dismissed the petition and affirmed the decision of the Court of Appeals, with costs against the petitioners, so that the Granada sisters were held personally liable to the Philippine National Bank.

Remember This

An admission in a pleading is read as a whole, and a qualifying phrase cannot be lifted out to defeat the pleader's real cause of action. Examiners use this case to test judicial admissions, alternative pleadings, and the personal liability of signers of promissory notes who claim to act merely as agents.